Student loans are not evil, but they should be proportionate to future earnings.
Michelle Sullivan and her husband, Tim, have been putting college money away for their 9-year-old son, Ciaran, since he was a baby. Today they have more than $10,000 in a 529 plan—and they know they won’t likely be able to cover four years of tuition come 2022 when their son heads to campus. “I want to be comfortable that we can at least cover the first year in full,” said Michelle Sullivan, 41.
The Sullivans, who live in Vienna, Virginia, have also explained to their son that he will have to contribute to college costs via his own savings and, down the road, summer jobs.
“And we’re hoping there are grants and scholarships,” Michelle Sullivan said.
For many American families, paying for college also includes extensive student loan debt—now $27,000 per graduate, on average, according to the Institute for College Access & Success’ Project on Student Debt. If you’re facing down tuition bills in the next few years, there are a few other tricks to make college more affordable—and keep your child from taking on too much debt.
Some pointers on paying your way when college days are near:
Be smart about high school. Have your student take as many Advanced Placement classes as reasonably possible. If he scores high enough to get college credit, you could save yourself several pricey credit hours in general courses. Similarly, consistently good grades and strong scores on tests like the SAT will make it easier to qualify for merit scholarships at private schools and second-tier schools. Those institutions are more likely to offer academic scholarships to attract talented students, said Mark Kantrowitz, former publisher of Fastweb and FinAid and current publisher of Edvisors.
Apply for everything. Even if you’re convinced that you won’t be eligible for need-based aid, fill out the Free Application for Federal Student aid, just in case. Have your student apply for scholarships every year, not just her first. A good place to start: Fastweb.com or Scholarships.com, which allow you to search for scholarships and grants. Answer the optional questions on the scholarship matching questionnaire to get a broader range of matches. The guidance office at your child’s high school can point out local scholarships that might not be in bigger databases—and that may have far fewer applicants with which to compete.
The average American family covers 29% of college costs with grants and scholarships, according to a 2012 study by college lending company Sallie Mae and Ipsos, a private research firm. It might seem onerous to your college-bound teenager to spend three hours writing an essay and filling out an application for a $750 scholarship, but if they win the award, that’s a whopping $250 for each hour of effort. A note: depending on the school, external scholarships might reduce need-based financial aid—but the methodology is at each school’s discretion. Some universities might reduce loan offerings (such as Stafford or Perkins) to offset scholarships and leave grants intact. Contact schools directly to find out their formulas.
Compare costs. A college’s sticker price isn’t necessarily what you will pay, and aid differs from school to school. You might get more grants, for instance, from a higher-priced private university than a less expensive state school. You can get an idea of what schools typically award incoming students at U.S. News and the College Board. Take a look at the ratios of grants to loans or work study, and the average aid package at each. You can also compare a variety of things—including net price—at the Department of Education’s collegecost.ed.gov.
Don’t be afraid to borrow—reasonably. Student loans are not evil, but they should be proportionate to future earnings. In general, “total student loan debt at graduation should be less than the student’s annual starting salary, and ideally a lot less,” Kantrowitz says. If your student is set on an occupation that pays very little, you won’t want her to graduate with six-figure debt.
Make alternative choices. The easiest way to pay less for college is to pick a less expensive school—as 69% of families are now doing. Families also cut costs by having a student live at home (51%) and enrolling in community college (29%). Spending two years at a community college and transferring to a four-year school later will save you serious cash—as long as your student sticks with it. Of those who enrolled in a two-year program, only about two-fifths had a bachelor’s degree six years later, Kantrowitz said, so make sure your child is committed. On the flipside, zeroing in on a major in the first year and taking full class loads could lead to early graduation—and a semester or more of savings.